Holcomb Calls Sales Tax and Employer Tax Regressive

Likely council candidate not sure how she'll vote on Metro measure.

Very likely Kshama Sawant challenger Alison Holcomb, an ACLU attorney and pot legalization advocate, fielded our questions yesterday about the influence her husband, a small restaurant owner, had on her decision to take on Sawant; many indie restaurant owners were frustrated by Sawant's hard-line stand during the $15 minimum wage debate.

Holcomb was candid, telling me: "I think it's fair to say his concern prompted me to question whether the idea [a $15 minimum wage], which sounded great at first, had been thought all the way through before being championed as an inevitable ballot issue. ... Yes, Sawant's approach to the minimum wage debate has heavily influenced my thinking about whether to run..." (Holcomb says she supports the $15 law, citing the phase-in as key.)

She went on to tell me something that I didn't quite follow, though. She said Sawant's "support of a regressive employee 'head tax' to fund public transportation" also made her question Sawant's judgment.

(She was referring to Sawant's idea for Metro funding; Sawant and City Council member Nick Licata proposed an employer "head tax"—and an expanded commercial parking tax—as an alternative to the mayor and council majority proposal to fund Metro with a sales tax; both Sawant's proposal and mayor's proposal, by the way, also included a regressive $60 vehicle license fee, though it was offset by a $20 rebate for low-income people.)

Sawant and Licata's "head tax," or formally, the employee hours tax, is a tax that would paid by employers (less than a penny per employee hour worked) on the number of hours all their employees work—and lefty Licata and Sawant proposed it yesterday (along with expanding the commercial parking tax) as a way to backfill the sales tax that they intended to strip out of the Metro measure. (They got voted down.)

The employer tax worked out to about $18 a year per full-time employee and would have raised $7 to $8 million; the parking tax would have raised about $13 million.

I didn't follow why Holcomb thought taxing busineses was "regressive" and followed up with her. She said:

Holcomb's larger point? One that emerged during the $15 debate: All businesses aren't The Man.

"It’s regressive, by definition, because the burden of the tax falls heavier on businesses with smaller profit margins than on those with larger profit margins. A flat 'head tax' takes a proportionally larger bite out of net revenue when the margin between gross revenue and costs is smaller."

Wonky stuff. Her point is this: Every business, no matter what its size, would be hit by the same flat rate,, regardless of its ability to pay.

Ok. But bigger companies—more heads (employees)—would, by definition, pay more. And it's not always the case that smaller companies have smaller margins, anyway.

(And footnote: The proposal actually spared the smallest of companies—exempting the first two employees; A UW study found that 75 percent of Seattle businesses had 10 or less employees and the majority of those had one or two employees. )

This isn't to quibble with Holcomb's larger point—one that emerged during the $15 debate—all businesses aren't The Man.

Asked about yesterday's city council vote to reject the "head tax" idea and go with a sales tax, Holcomb said: "I'm not pleased about the sales tax option, either ... I don't have a quick fix in my pocket, and I don't yet know how I'll vote on the referendum," adding, "this is not a question of me preferring either regressive tax option. Instead, I think we ought to pause before adding yet another regressive tax option to our funding portfolio and look harder for progressive options."

Of course, there are no immediate options available. I have asked Holcomb how she would have voted yesterday.

After Licata and Sawant's employer tax idea went down yesterday, they both voted for the regressive sales tax version.